A possible explanation for low P/E

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    Posted: 12 December 2011 09:27 PM #16

    This guy must not be old enough to remember the iPod story.

    referring to macorange’s link.

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  • Posted: 12 December 2011 09:38 PM #17

    macglenn - 13 December 2011 01:27 AM

    This guy must not be old enough to remember the iPod story.

    referring to macorange’s link.

    I cracked up when I got to the bottom of Yared’s stupidity dissertation.  Of the hundreds, maybe thousands of people that read that article, only 45 liked it (and they were all members of Ballmer’s extended family).  Pathetic.

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  • Posted: 12 December 2011 11:20 PM #18

    Gregg Thurman - 12 December 2011 05:09 PM

    It could have very well been because MSFT was a member of the DOW.  That opens up a lot of funds that invest primarily in the DOW.  More funds - more capital, more capital - higher price.

    Really?  A lot?  Primarily?  How big are these funds?  They invest in the Dow, but not in the biggest companies in the world, just because they are not in the Dow?

    I hope these fund managers work for a salary of $1 per year.  They would still be overpaid.  grin

         
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    Posted: 13 December 2011 12:24 AM #19

    capablanca - 13 December 2011 03:20 AM
    Gregg Thurman - 12 December 2011 05:09 PM

    It could have very well been because MSFT was a member of the DOW.  That opens up a lot of funds that invest primarily in the DOW.  More funds - more capital, more capital - higher price.

    Really?  A lot?  Primarily?  How big are these funds?  They invest in the Dow, but not in the biggest companies in the world, just because they are not in the Dow?

    I hope these fund managers work for a salary of $1 per year.  They would still be overpaid.  grin

    maybe he was referring to the index tracker funds - which literally can ONLY invest in Dow stocks.

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    Posted: 13 December 2011 01:35 AM #20

    adamthompson3232 - 13 December 2011 03:37 AM
    Gregg Thurman - 13 December 2011 01:26 AM
    macorange - 13 December 2011 12:39 AM

    There’s always money available somewhere for a great deal.  Most people simply don’t agree with us AFB members that AAPL is underpriced.  What do we see they don’t?  Here is a representative opinion, from today’s musings:

    http://news.cnet.com/8301-27076_3-57341421-248/is-apple-vulnerable-in-2012-you-bet/

    People analogize to what they know.  In Apple’s case they analogize to Sony, Motorola and a lot of other once high-flying consumer device-makers who all suffered fast and furious declines in the face of transformative competition.

    What we understand far more than average investors is that Apple consumers are far, far stickier to Apple than any other device-maker in history, which make the analogies deeply flawed.  The stickiness comes from a combination of ecosystem effect, brand loyalty, and consumer satisfaction.

    Apple’s growth may soften a little in 2012 (or strengthen) but we know that the chance that Apple revenues IMPLODE like so many of its predecessors is remote.  AAPL’s PE suggests that most people believe imminent implosion is likely. 

    Stickiness of customers for consumer device-makers is a new phenomenon.  Those of us who “get it” can benefit from this understanding with investment dollars.

    Mac, I agree with your statement to a point, especially the part about consumer satisfaction.  There’s a formula that can determine future share based on comparisons of competing consumer satisfaction rates.

    Where we diverge is here.  There are two types of investors.  The first being retail, and the second institutional.

    Both are hampered by the amount they can invest, the retail investor in absolute terms (think 2008 wealth haircut), the institution through by-laws and government regulation.

    LongAAPL’s assertion that dividends and/or a DOW listing would increase institutional investment funds is right on, as many fund’s investment strategies are narrowly defined.  Buybacks do nothing to increase available investment capital.  Stock splits may have an affect, but I doubt it would be much, as the split would only attract investors with more limited funds, and total retail investment in AAPL is only ~30%.

    To me, there is an awful lot to be said for the fact that retail investors haven’t pushed AAPL up much more over the last few years. Yeah, retail investors are fickle and fearful but I would think the massive growth in the installed Apple product userbase to cause a lot of new dollars to flow into AAPL. That apparently hasn’t happened even as the Apple product userbase grew by 10x or more. People often invest in what they know and now we have hundreds of millions of people who know and use Apple products compared to (maybe) less than 10 million only five years ago. Yeah, the stock is up a lot over the last five years but I would expect retail alone to push it even higher. Then consider that the Wall Street punks also use Apple products now and I can’t understand why it isn’t higher.

    There are many reasons why our stock is in the dumps when looking at undervalued p/e.

    Several come to mind.

    I think big funds have gotten so burned in 2008 they are more conservative then ever on technology stocks.  Especially after 2000.  yes we got a p/e of 45 in 2007 but that was driven by the housing bubble.

    Too many retail investors are afraid of stocks priced over $100 or $200.  I can name MD and lawyers who say the stock is too expensive and they want to own 500 shares of it not 50.

    The US economy is not very strong and there is not much extra money just to invest in the market.

    I think a 10:1 split will do wonders for the stock.

    the stock will move 2% just with an extra 2 million shares traded by the big boys.

    Those 30% of retail investors will light a fire that can not be ignored by the big boys.  Everyone will jump on board.

    All we need is a reasonable p/e of 25.  That would put us around $1125 a share next year but we have to live with $600.

    My only concern is that by the time we get there we may be only growing at 20% every year instead of 55% and we will get stock with a p/e of 15 after all.

    It only means we will get richer over a longer period of time. :-D

    [ Edited: 13 December 2011 01:38 AM by omacvi ]